Housing Shows Net Value Growth

A column by Ken Harney in yesterday's San Francisco Chronicle Real Estate section show that most real estate markets in the country have a net cumulative value growth over the past 60 months.  Included in this study were several smaller markets that never experienced the boom.  Also included, evidence that home values in several large metropolitan markets have increased over the last 60 months, even though some have experienced declines in the last year.

For San Francisco, home values are up 31.9 percent over sixty months, while they are down 8 percent in the last year.

Some thoughts on this study:  First, these values represent all neighborhoods. and as we know, home values are like micro-climates and value varies by neighborhood.  (neighborhoods in the southern parts of the city, bordering Daly City, in the west, like the Sunset and 1 bedroom lofts in SOMA are not faring well in the downturn and have experienced much bigger losses in value than other, more desirable neighborhoods like Pacific Heights, Noe Valley, North Beach, etc).  Second, in the last five years, many buyers participated in bidding wars to purchase their homes and condos.  Some overbid by a few thousand dollars.  Others won their bids by paying $65,000 to $105,000 than the next bidder in line (from representing 10 buyers in a 3 month period in 2004 whose offers did not prevail, and were put in 1st backup position, presumably based on price).  And third, I suspect that if this study is updated next month, it will show a much bigger decrease from last years values and a much lower increase in net value in the last 5 years.  Why?  Because we have far fewer motivated and qualified buyers in the last few months.  Some lost their down-payments in the stock market crash.  Others have lost jobs or are afraid they may lose their jobs. 

At the same time, this market has many Sellers, some who have owned their homes for many years, and are willing to sell at current market values, which to them represents a huge gain.  The bottom line:  real estate is a good long term investment, and values may increase and decline, like values in any other market over time, reflecting many macro and micro-economic factors.  San Francisco, at its core is a great place to live, and because we have limited land and supply is more limited than most other markets, is likely to recover faster than other markets.